Budget 2026 and the Venture and Growth Capital Plan: What Changed for BC Founders

This is the second of two Authgnosis Research Notes on the plan. Part 1 of this series, Canada's Venture and Growth Capital Plan for BC Founders, traces how the plan's capital reaches companies through private funds, by company type. This note covers what the federal budget tabled on November 5, 2026 adds to that picture. Throughout, Part 1 and Part 2 refer to the two notes in this series, not to stages or parts of a government program.

Summary: the plan's terms are unchanged, and proposed tax measures would change what founders, employees, and angels keep from their shares

Budget 2026 restates the $750 million Early and Growth Stage Investment Strategy, one of the two federal programs that together make up the $1.75 billion Venture and Growth Capital Plan. It adds no money, no matching ratios, and no timelines. It does not address the $1 billion Growth Venture Capital Catalyst Initiative (Growth VCCI) or the $500 million Canadian Tech Growth Fund, and nothing in it withdraws or changes either one. Both continue as announced in October. The deadlines and proposed terms described in Part 1 stand.

Four measures in the budget sit beside the plan. Two would change what individuals keep from their shares, one widens SR&ED, and one adds a possible federal co-investor:

• Canada Growth Incentive exemption: up to $15 million of capital gains exempt per individual, per business, on qualifying shares issued on or after November 5, 2026. It applies to individuals, not to funds or institutional investors.
• Small business rollover: investors who sell eligible shares get up to three further calendar years to reinvest the proceeds, and up to five through a simple agreement for future equity (SAFE).
• SR&ED: the program now covers testing for a product's first regulatory approval or certification, and the cost of registering and maintaining intellectual property (IP).
• Canada Strong Fund: a $25 billion federal fund that may invest directly in high-potential companies alongside a lead investor in a market-priced round.

The plan's delivery agent will also change shape: the budget starts a transition to combine the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) into a single federal development bank.

The $1.75 billion plan combines two programs with different streams, matches, and administrators

The federal government announced the Venture and Growth Capital Plan on October 22, 2026, as a single name for two programs: the $750 million Early and Growth Stage Investment Strategy and the $1 billion Growth Venture Capital Catalyst Initiative (Growth VCCI). Both commit federal capital to private funds rather than to companies, and in the streams whose terms are published, those funds must first raise matching private capital. A company reaches either program by raising from a fund that receives an allocation, not by applying.

The budget does not use the plan's name or the $1.75 billion figure. It refers only to the Early and Growth Stage Investment Strategy, so the sections below treat the two programs separately.

The budget restates the $750 million Strategy and publishes no new terms

Budget 2026, Chapter 1: Canada's Investment Supercycle restates the Early and Growth Stage Investment Strategy as first announced in Budget 2025, on a cash basis and delivered by BDC. It publishes no design or match for the pre-seed and seed stream and does not change the later and growth stage terms under consultation. Its cost table records $150 million over 2026-27 to 2030-31, of which $56 million was already provisioned; the investment envelope stays at up to $750 million, committed to funds as they raise their private match. Growth VCCI continues on the terms in the table above.

The budget's Annex 4: Impacts report adds one observation relevant to BC: the venture capital fund managers and co-investment partners who will receive the Strategy's capital are concentrated in Toronto, Vancouver, and Montréal.

BDC delivers the plan while it is combined with Export Development Canada

Budget 2026, Chapter 6: A more efficient government launches a transition to bring BDC and EDC together into a single federal development bank, overseen by a specially constituted board of directors. The budget states that existing products and services will be fully maintained throughout the transition, and it gives no timeline. BDC administers the $750 million Strategy on the government's behalf, negotiates the Growth VCCI agreements with the managers ISED selects, and runs the $6 billion Defence Platform, which the budget restates. The budget gives no indication that the plan's delivery will change before the new institution's mandate is published.

The Canada Growth Incentive would exempt up to $15 million of gains on shares issued from Budget Day

The Canada Growth Incentive is set out in Budget 2026, Chapter 1 and, in detail, in the budget's Tax Measures: Supplementary Information. A Canadian-resident individual would be able to exempt up to $15 million of capital gains realized on qualifying shares of a qualifying corporation. The limit applies separately to each individual in respect of each business. Shares must be issued on or after November 5, 2026 and before 2037, so shares issued before Budget Day do not qualify. The exemption applies to shares issued in new rounds and to new shares issued to founders and employees. The budget's own example: a founder with a $15 million gain would retain about 96% of the value on exit, compared with about 71% before. The example uses Ontario tax rates.

Most of the conditions apply at a point in a share's life, from issue to sale:

1. Before November 5, 2026Shares issued before Budget Day do not qualify
2. At issuance, November 5, 2026 to the end of 2036The company passes three testsIt is a Canadian-controlled private corporation (CCPC). All or substantially all of its asset value is used, or intended within 36 months to be used, in a qualifying business carried on primarily in Canada. The combined carrying value of its assets and those of related corporations is $100 million or less immediately before and after issuance. The share is issued for cash or for employment services, to the individual or to a partnership they belong to.
3. First 24 monthsThe business stays primarily in Canadafor at least 24 consecutive months after issuance.
4. Throughout the holding period, at least 36 monthsHalf the assets stay in the business50% or more of asset value is used in a qualifying business, and the share is held for at least 36 consecutive months.
5. At saleUp to $15 million of the gain is exemptif the company is Canadian-resident, either private or listed on a designated Canadian stock exchange, with all or substantially all of its asset value used in a qualifying business.

Who can claim, which businesses are excluded, and what is still to come:

Each company type meets the conditions differently

Series B+ scale-ups. The $100 million asset test applies at issuance, to the company and its related corporations together. A scale-up that passes the threshold can no longer issue qualifying shares. Shares it issued before then remain eligible if the other conditions continue to hold. The test is applied immediately after issuance as well as before, so the cash a round raises counts toward the $100 million. On the budget's wording, a company near the limit could see a large round's shares fail the test even though it qualified the day before, so the post-money balance sheet is worth modelling before the round size is set. CCPC status is also tested at issuance. As Part 1 notes for SR&ED, a round that gives control to non-residents or public corporations, including through share rights in the term sheet, can end CCPC status. The same clause could now cost both the enhanced SR&ED rate and this exemption.

Pre-seed and seed. Founders and angels are both in scope, because shares issued for cash qualify. BC's small business venture capital tax credit is a separate provincial measure, and the federal budget does not address how the two interact. Confirm that with a tax adviser before a round relies on both.

AI and dual-use. A company selling its own technology product is not in an excluded sector. A firm that earns its revenue from consulting services, or whose principal asset is the skill of its staff, is excluded, and the named professions include engineers. Contract engineering and AI services firms should check the exclusion before relying on the exemption.

Employee equity. A share qualifies when it is issued for cash or in exchange for employment services. The budget text does not say how stock options are treated, and that detail determines how the exemption applies to most employee equity plans. It should be confirmed when the draft legislation is released.

Defer capital gains tax on small business shares by reinvesting within three years, or five with a SAFE

An individual can already defer tax on a capital gain from eligible small business corporation shares when the proceeds buy replacement shares in the year of sale or the following year. Budget 2026 proposes three changes in its Tax Measures: Supplementary Information, for sales on or after January 1, 2027:

• Longer window: the year of sale plus three calendar years, with a reserve that defers the gain from year to year until the window closes.
• SAFE provision: an investor who signs a simple agreement for future equity with an eligible company within the three years gets two further years, up to five in total. If no shares are issued under the agreement by the end of the fifth year, the deferred gain is taxed.
• Asset test: during the holding period, the company's assets need only be used primarily in an active business, rather than all or substantially all. The stricter test still applies at issuance and at sale.

Proceeds that are not reinvested would attract interest at the prescribed rate from the balance-due day for the year of sale. The longer window fits seed investors, who typically place capital across several companies and rounds rather than in a single reinvestment.

SR&ED would cover first regulatory certification and IP protection costs

Under the budget's Tax Measures: Supplementary Information, for tax years beginning on or after November 5, 2026, two kinds of cost would become eligible under SR&ED, as long as they relate directly to an eligible project:

• Regulatory and certification work: tests, technological validations, and studies needed to obtain the initial approval or certification required to commercialize a product or process. Eligible costs are the usual SR&ED categories: wages and salaries, materials, contracts, overhead, and machinery and equipment.
• IP protection: the costs of obtaining and maintaining patents, certificates of supplementary protection, plant breeders' rights, and registered copyright in software. Enforcement and litigation costs are excluded. Preparation work counts only when it is done in Canada, and recapture applies if the IP is later sold.

The budget estimates support of $930 million over five years and $235 million a year ongoing, and the Canada Revenue Agency will publish sector-specific guidance. The change matters most for hardware, medical device, and other regulated products, where certification testing can be a large share of development cost.

Part 1 described the enhanced 35% refundable credit on up to $6 million of qualifying spend as a Budget 2025 proposal. Bill C-15, the Budget 2025 Implementation Act, No. 1, received Royal Assent on March 26, 2026 and enacted it, including the extension to eligible Canadian public corporations, for tax years beginning on or after December 16, 2024.

The Canada Strong Fund adds a possible co-investor in priced rounds

The Canada Strong Fund, announced in the 2026 Spring Economic Update and described in Budget 2026, Chapter 2: A more competitive and connected Canada, is to receive an initial $25 billion over three years. It invests through two streams:

• Stream 1, co-investments: a minority stake on terms that mirror private investors', where a company or project already has federal support, such as a Strategic Response Fund contribution.
• Stream 2, strategic investments: direct equity on commercial terms in high-potential companies, alongside a lead investor in a round priced by the market. The budget's examples are an agricultural technology company and the government's commitment to Cohere's Series E.

For a scale-up, Stream 2 is a federal route to equity that does not pass through a fund, alongside the BDC Defence Platform and the Canadian Tech Growth Fund in row 1 of the diagram in Part 1. The Fund operates for now as a subsidiary of the Canada Development Investment Corporation, and legislation to make it a standalone Crown corporation is to follow. No application route or investment criteria have been published. A retail product, Canada Strong Notes, is planned for 2027.

Other programs restated or continue unchanged

The table covers the remaining programs on the Part 1 map. Where the budget does not address a program, the program continues on its published terms: the budget neither withdraws nor changes it. Defence and sovereign compute items are drawn from Budget 2026, Chapter 5: A safe and sovereign Canada.

CEO and CFO checklist: five new items

Each addition extends an action in the 90-day list in Part 1; the rest of that list is unchanged.

CEO

• Before the next share issuance, including grants to employees, confirm with tax advisers whether the company meets the Canada Growth Incentive conditions at issuance: CCPC status, combined assets of $100 million or less after the round, and a qualifying business carried on primarily in Canada.Extends: confirm the company will meet the proposed Canadian-based definition at its next investment.
• Expect angels and seed funds to ask whether the next round qualifies, and have the advisers' view ready before the term sheet.Extends: ask current and target lead investors whether they intend to apply.
• Watch for the Canada Strong Fund's investment criteria if the company expects a priced round alongside a lead investor.Extends: monitor the Canadian Tech Growth Fund for published terms.

CFO

• Add Canada Growth Incentive eligibility to the before-and-after model of the next round, and, for tax years beginning on or after November 5, 2026, add first-certification testing and IP registration and maintenance costs to SR&ED cost tracking.Extends: model SR&ED eligibility before and after the next round, including CCPC status and taxable capital.
• Record the issue date and consideration for every share issued from November 5, 2026, with the cap table in the data room. The 36-month holding period and the 24-month Canadian activity test both run from issuance.Extends: assemble a due diligence data room with current financials and cap table.

Several details are still unpublished: the Canada Growth Incentive's integrity rules and its treatment of stock options; the design and match of the $75 million pre-seed and seed stream; the terms of Growth VCCI's life sciences and emerging-manager streams; the Canadian Tech Growth Fund's terms; the Canada Strong Fund's criteria; and how the sovereign AI compute access will be delivered.

To review where your company sits on the Part 1 map after the budget, and what to prepare first:

Sources

1. Budget 2026, Chapter 1: Canada's Investment Supercycle, Department of Finance Canada, November 5, 2026Used for: Early and Growth Stage Investment Strategy, cost table, Canada Growth Incentive overview, SR&ED, Strategic Response Fund, NRC IRAP Clean Technology
2. Budget 2026, Tax Measures: Supplementary Information, Department of Finance CanadaUsed for: Canada Growth Incentive conditions, small business rollover, SR&ED eligible activities and costs
3. Budget 2026, Chapter 2: A more competitive and connected CanadaUsed for: Canada Strong Fund, regional development agencies
4. Budget 2026, Chapter 5: A safe and sovereign CanadaUsed for: BDC Defence Platform, BOREALIS, sovereign AI compute
5. Budget 2026, Chapter 6: A more efficient governmentUsed for: BDC and EDC transition, Canada Growth Fund mandate
6. Budget 2026, Annex 4: Impacts reportUsed for: beneficiaries and geographic concentration of fund managers
7. Canada announces landmark investment in Cohere to scale secure, sovereign AI, Prime Minister of Canada, news release, October 29, 2026Used for: the Canada Strong Fund's Stream 2 example, the equity commitment to Cohere's Series E
8. Minister Joly unveils Canada's new Venture and Growth Capital Plan, ISED news release, October 22, 2026Used for: the plan's two programs, Growth VCCI streams and administration
9. Backgrounder: Canada's Venture and Growth Capital Plan, ISED, October 22, 2026Used for: the plan's two programs, stream amounts, expected private capital
10. Discussion guide: Later and Growth Stage Investment Stream, ISED, October 2026Used for: proposed match and input deadline
11. Growth VCCI call for expressions of interest: Fund-of-Funds stream, ISEDUsed for: fund-of-funds match and expression of interest deadline
12. Bill C-15 (45th Parliament, 1st session): Budget 2025 Implementation Act, No. 1, LEGISinfo, Parliament of Canada; Royal Assent March 26, 2026Used for: enactment of the Budget 2025 SR&ED changes

Current as of November 6, 2026. This Research Note is general information for founders, CEOs and CFOs of BC technology companies. It is not financial, tax or legal advice. The Canada Growth Incentive, the rollover changes, and the SR&ED expansion are Budget 2026 proposals and are not law until enacted. The plan's growth stream terms are proposals under consultation. Program terms, eligibility, and deadlines should be confirmed with the administering agency before acting. Authgnosis is not affiliated with any government program.

© 2026 Authgnosis Business Consulting Inc.